What Types of Insurance Should Small Businesses Have?

Posted by Amod Dandge

From the day an entrepreneur sets up a company, they expose themselves to certain risks. One lawsuit can be enough to shut down a small business before it even has a chance to get off the ground — the average customer injury insurance claim can go up to $35,000. Therefore, it’s crucial for business owners to ensure they have the right insurance for all kinds of business risks, so as to not leave themselves exposed and vulnerable.

Fortunately, companies have access to a wide variety of insurance types to protect them against various risks. Check this breakdown of some insurance policies that your business should have in place, even though you may not need them all right up front.

General Liability Insurance

This is usually the first policy any new firm gets, because it covers your assets in case of a claim against you. For instance, general liability insurance will cover you if someone slips and falls at your place of business. This type of insurance can be customized based on your business’ needs. And even though you probably won’t find an out-of-the-box solution that covers everything, you’ll want to get this policy shortly after forming your company so the policy will pay for potential damages.

Workers’ Compensation

To ensure that you and your employees are just as well protected as your clients and customers are, a workers’ compensation policy is needed. This policy covers injuries incurred by you or your team members during time on the job. In most U.S. states, a workers’ compensation policy is mandatory if you employ a minimum number of people as W-2 staff members (therefore, it may not be optional if you fall under this category). For instance, in California, you must have workers’ compensation, even if you only have one employee. Therefore, check out your state’s requirements and obtain coverage accordingly.

Unemployment Insurance

Much like the workers’ compensation policy, unemployment insurance is usually required by your state if you have employees. This type of insurance ensures that staff members can continue to earn money if they lose their jobs. It is best to set up this coverage when you first enroll employees in your payroll process.

Business Owner’s Policy

Some insurance companies offer comprehensive business owner’s packages that allow you to buy a group of business insurance policies at one time, and this is known as a business owner’s policy (BOP). These packages can be customized, and typically cover general liability insurance, commercial property insurance and business income insurance at the same time.

Property Insurance

Property insurance allows you to be reimbursed if your place of business experiences losses or damages. For instance, if a fire breaks out in your office, this policy would likely cover not only the building itself, but also the items inside it, including computers, furniture and inventory.

Business Interruption Insurance

In case of damages due to issues like fire in your building, your property insurance may cover you for your computers, inventory and so on, but it’s possible you will need business interruption insurance to reimburse you for the losses you face from not being able to conduct business while you are awaiting a new batch of inventory. This policy will essentially help you replace income you lose during times of interruption.

Commercial Auto Insurance

Not every organization has a company car, but if yours does, then a commercial auto insurance policy can come in handy. This insurance will reimburse you if your work vehicle is damaged or if someone is hurt in the vehicle during the course of business.

Cyber Liability Insurance

Most firms keep private customer information on file, from Social Security details and credit card data to perhaps even health records, depending on the type of business. To ensure that you’re protected against network breaches, you should consider cyber liability policies. These policies allow you to defend yourself in case of a privacy breach, and help you pay for your defense and/or any damages if you’re found guilty.

Product Liability Insurance

In certain cases, a general liability policy may not cover you if a product you sell malfunctions and causes harm. If you create, distribute and/or sell products, you should consider adding product liability insurance to protect yourself.

Home-Based Business Insurance

If you’re running a business out of your house, you must consider getting a rider on your homeowner’s insurance policy to protect yourself. This policy can cover injuries that someone might encounter after visiting your home to do business, or in some cases, it may even help you recoup the cost of losing business equipment.

As you consider these types of insurance policies, it's a good idea to get in touch with a professional who can evaluate your liability risk and also help you choose coverage types and amounts. Attorneys, insurance agents, accountants and professional organizations can all be good resources as you navigate the insurance process. 

 

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